What is an unsecured loan?
Unsecured personal loans are one of the two standard types of loans – secured and unsecured. A secured loan is one where the money borrowed is secured against an asset such as a house or vehicle. In the event of non-repayment, the lender has the right to seize this asset as payment. In contrast, none of the borrower’s property is used as collateral against an unsecured loan. The process of applying for an unsecured personal loan is quick and can be done 100% online, as the lender doesn’t need to value assets prior to issuing funds. Unsecured loans hold more risk for the lender though, and therefore typically have higher interest rates.
How much do unsecured personal loans cost?
The cost of an unsecured personal loan will depend on your personal situation and previous financial history. The following factors will play a part:
- How much you borrow – the more you borrow, the higher your monthly repayments will be.
- How long you borrow for – borrowing for longer will mean you pay less back for each repayment but pay more overall.
- Try to choose a happy medium where you can afford the monthly payments over a shorter period.
- Credit History – the lower interest rates are typically reserved for borrowers with better credit history. If your credit score is low, you may be offered a high-interest rate meaning a higher cost of borrowing.
- Your Income – if you have a low income, the lender may charge a higher interest rate.
What to check when taking out an unsecured personal loan
Our comparison tables can be used to review unsecured loan providers. Here are some of the loan features to keep an eye out for:
- Monthly Payments – this is the amount you will repay each month. It is important to make sure you can afford these payments otherwise you’ll slip further into debt. Some lenders may offer freeze periods on repayment, which can be useful to look out for.
- Representative APR – this is the interest rate payable on the loan. A lower representative APR will likely mean a cheaper loan.
- Fees – are there other fees associated with the personal loan? Such fees can include an establishment fee or monthly service fee that contribute to the cost of borrowing.
Comparing loan offers
Friendly Finance gives you a chance to find reliable, unsecured personal loans without any hassles. Our online comparison table is an effective way to compare personal loan products from different providers. We research and vet all the providers within our comparison tables, presenting the relevant information about the product in an easy-to-read format. Our personal loan comparison service is unmatched as we find the perfect loan provider for you. You can simply review multiple offers within a few minutes, allowing you to make an informed decision quickly.